Free Gifts and Cheap Coffee No Help as McDonald’s Japan Troubles Continue

The collapse of McDonald’s Japan continued as the company recorded declining year-over-year sales for the 12th consecutive month at the end of March. The situation is dismal, as whatever the company does seems to end in failure.

Its 100-yen menu (about one US dollar) and free giveaways no longer impress customers who have grown accustomed to deflationary pricing. Its “Food in 60 seconds or next burger free” campaign, which the company initiated in January as a measure to help revive fortunes, also failed to deliver. And there doesn’t appear to be any light at the end of the tunnel. Its most recent venture, free gum and other “unique”gifts to purchasers of breakfast sets, has been roundly criticized on the Internet as being a “hackneyed idea.”

Just a few years ago the company was bringing in new and innovative services one after the other under the direction of new president and chairman, Eiko Harada, 64. Harada had left his position as president of Apple Japan to join McDonald’s in 2004, bringing about a v-shaped recovery at the floundering fast-food retailer which came to be referred to as “Harada Magic.”

Harada, calmly analyzing the company’s current woes, said, “The biggest reason behind our failure is our declining creative ability. We have not been able to astonish our customers.” How true. What has happened to the “Harada Magic?”

Kitaro Tanaka, a journalist who has been investigating the company’s business, offered, “The novelty of its seasonally-limited, high-priced menus, such as the Big America ALL STARS series, has worn off. Its business model of drawing in customers with loss-leaders and then having them upgrade to higher priced offerings has collapsed. Additionally, young people are starting to use 24-hour stores as late-night Internet cafes, buying one 100-yen coffee and taking up seats for hours on end, making it difficult for business people to use the locations. Such things are driving down average customer spend and leading to decreased sales, creating a vicious circle that can’t be broken. Harada, who has won acclaim as a talented business manager, must also be feeling exhausted.”